“This is all the more urgent in the current context of the COVID-19 pandemic when millions of Indians, especially in the informal sector, have lost their livelihoods, are now leading more insecure lives and are falling back into poverty,” the report of the committee mentioned.
It famous that for low-income households, calamities equivalent to diseases, accidents, death or the lack of belongings usually have very grave monetary penalties. Such occasions can push these households deeper into poverty as their meagre sources get depleted.
Many get drawn into debt traps as they borrow past their means, promote productive belongings, take kids out of college or put them to work, compromise on meals, or go away illness untreated, it mentioned.
A 2013 report, cited by the panel, famous that the Indian micro-insurance sector has solely coated 9 per cent of the general inhabitants and 14.7 per cent of the potential micro-insurance market measurement within the nation.
India, like different international locations, might want to enhance entry for a number of gamers if it needs to considerably enhance insurance coverage penetration.
After discussions with organisations which were offering micro-insurance, nationwide and worldwide specialists, the committee has made a number of suggestions.
One of them is that “entry-level capital requirement for standalone micro-insurance entities should be reduced to Rs 20 crore maximum from the current Rs 100 crore”.
Also, risk-based capital (RBC) strategy ought to be adopted to allow the progressive progress of the micro-insurance enterprise whereas sustaining the very best prudential requirements.
“Micro-insurance companies (as well as cooperatives and mutuals) should be allowed to act as composite insurers to transact both life and non-life business through a single entity. Their portfolios should have a balance of both life and non-life business” is one other key suggestion made within the report.
The report additionally urged that Irdai and/or the central authorities might set up a Microinsurance Development Fund to help and promote the expansion of this enterprise throughout the nation.
Irdai had constituted the committee in February 2020 consisting of members from NGOs, unbiased consultants and different individuals having expertise of working in monetary inclusion and regulatory fields, to review the idea of standalone micro-insurance corporations.